(April 2019) The month of March was a busy one for housing policy news! Rather than limit ourselves to just one topic, we would like to share some brief thoughts on some of the updates that most impact our work and the work of our Community Buyers:
- Opportunity for Public Comment: Federal Home Loan Bank members to be reviewed on community support performance
The Federal Housing Finance Agency announced that it will review all applicable Federal Home Loan Bank members for two statutory factors: CRA performance and record of lending to first-time homebuyers. The general public is invited to provide comments on individual members’ community support performance via their website by April 29, 2019. This is a great opportunity for Community Buyers to positively acknowledge a partner financial institution, or provide constructive feedback on performance.
The names of applicable members currently subject to Community Support review can be found on the public websites for the individual Banks at:
· Federal Home Loan Bank of Boston–District 1 (Connecticut, Massachusetts, New Hampshire, Rhode Island, Vermont) http://www.fhlbboston.com/communitydevelopment/programs/support_statements.jsp
· Federal Home Loan Bank of New York–District 2 (New Jersey, New York, Puerto Rico) http://www.fhlbny.com
· Federal Home Loan Bank of Pittsburgh–District 3 (Delaware, Pennsylvania, West Virginia) https://www.fhlb-pgh.com/Files/Resources/CSS.pdf
· Federal Home Loan Bank of Atlanta–District 4 (Alabama, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia) https://corp.fhlbatl.com/community-support-program/
· Federal Home Loan Bank of Cincinnati–District 5 (Kentucky, Ohio, Tennessee) https://www.fhlbcin.com
· Federal Home Loan Bank of Indianapolis–District 6 (Indiana, Michigan) http://www.fhlbi.com
· Federal Home Loan Bank of Chicago–District 7 (Illinois, Wisconsin) https://www.fhlbc.com/community-investment/community-support-statements
· Federal Home Loan Bank of Des Moines–District 8 (Alaska, Guam, Hawaii, Idaho, Iowa, Minnesota, Missouri, Montana, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming) https://www.fhlbdm.com
· Federal Home Loan Bank of Dallas–District 9 (Arkansas, Louisiana, Mississippi, New Mexico, Texas) https://www.fhlb.com/membership/Pages/Community-Support-Standards.aspx
· Federal Home Loan Bank of Topeka–District 10 (Colorado, Kansas, Nebraska, Oklahoma) https://www.fhlbtopeka.com/community-programs-community-support-statements
· Federal Home Loan Bank of San Francisco–District 11 (Arizona, California, Nevada) http://www.fhlbsf.com/community/grant/community-support-review.aspx
- Federal Housing Administration (FHA) tightens rules on higher-risk mortgages
FHA unexpectedly announced that it is reinstating manual underwriting requirements to more closely examine mortgage applications from those with higher debt and weaker credit scores – every application that is flagged as higher risk. These requirements were actually removed in 2016 to facilitate the purchase of more homes. This is estimated to affect 40-50,000 borrowers each year. Since a significant percentage of FHA mortgages are issued to first-time homebuyers and low-to-moderate income buyers, the rule change is likely to disproportionately affect communities of color and millennials by putting them even farther behind on the path to homeownership.
- Senator Warren re-introduces broad housing bill
Senator Warren (D-MA) recently updated and re-introduced the American Housing and Economic Mobility Act, the most comprehensive housing legislation proposed in many years. This bill would direct hundreds of billions of dollars into affordable rental housing for low-income families, the shortage of which is currently at crisis proportions. More specific to NCST’s programs, the bill includes numerous provisions that support both homeownership and distressed housing markets. These include: a massive down payment assistance program for those living in formerly redlined communities; $25 billion in funding for the Capital Magnet Program for CDFIs; programs to support new construction and single family rehab/repair both for vacant and owner occupied homes; a program to help owners in a negative equity position; new rules for bulk sales of nonperforming loans that would support positive outcomes in communities; a much-needed update of the Community Reinvestment Act; and more. NCST supports this legislation and signed on to a support letter with fellow civil rights groups.
- Lack of clarity from the Department of Housing and Urban Development (HUD) affects mortgages for individuals with Deferred Action for Childhood Arrival (DACA) status
Confusion continues to swirl around whether HUD and FHA are revoking FHA mortgage eligibility for applicants with DACA status. While some lenders reported hearing from FHA and HUD that DACA recipients were no longer eligible for FHA mortgages, the agencies have unofficially said that they have not made that decision. This is now leading to a contradictory array of notices from state housing finance agencies and lenders, many of which are stating that DACA recipients are no longer eligible and citing Administration policy. Fortunately, Fannie Mae has just stepped forward to clarify the criteria for its mortgage purchases and that DACA mortgages are eligible to be purchased. HUD and FHA need to do the same.
- Supreme Court rules on debtor protections for underwater borrowers in non-judicial states
The Supreme Court issued an opinion on the Obdusky v. McCarthy & Holthus LLP foreclosure case, holding that underwater borrowers in the 33 non-judicial foreclosure states are not entitled to the same debtor protection from predatory practices that individuals who are behind on other kinds of payments would have under the 1977 Fair Debt Collection Practices Act. The Court concluded that the entities that handled these foreclosure proceedings were not primarily “debt collectors” under the law’s definition because they took limited action in this case. While a number of news outlets are reporting that this will have a widespread impact on foreclosure lawsuits, the reality is that the exact impact is unclear as this was a narrow ruling focused on the behavior of the entities handling the foreclosure proceedings. A concurring opinion by Justice Sotomayor also opened the door to the possibility of reconsideration if another case with different circumstances were to be brought before the Court.
- Renewed federal interest in reforming Fannie Mae and Freddie Mac
Reforming Fannie Mae and Freddie Mac (also known along with the Federal Home Loan Bank System as Government Sponsored Enterprises, or GSEs) has been a hot topic of conversation since they went into conservatorship in 2008. While Congress has not enacted any GSE reform legislation for the past decade, it showed renewed interest recently with a two-day Senate Banking, Housing, and Urban Affairs Committee hearing on Senator Crapo’s (R-ID) reform outline, which includes changes to current affordable housing goals, Duty-to-Serve requirements, the Housing Trust Fund, Capital Magnet Fund, and Market Access Fund. Shortly after Day 2 of the hearing, the White House released a memorandum directing the Secretary of the Treasury to develop a reform plan. While NCST and our Community Buyers typically interface with the GSEs in terms of their REO inventory, they play a significant and broader role in the housing market and it will be important to keep an eye on what happens with these reform efforts.
Theo Chang serves as a Senior Policy Associate for NCST.